The 150-year old colonial era ritual of following an April-March financial year is likely to be abandoned from the next year onwards. It will now be swapped from a January-December financial year. This is said to be in terms with agricultural harvests and monsoons.
While Finance Minister Arun Jaitley is all geared up to present the financial budget on February 1 for the Financial Year 2017-18.
In a bid to operate and function on the lines of the British government, the Indian government adopted the April-March financial year in 1867.
The finance ministry formulated an expert committee which is chaired by Shankar Acharya, former chief economic advisor. The main objective of setting up this committee was to assess the feasibility of swapping the financial year. The committee is due to submit its report to the government on December 31, 2016.
To swap the financial year, the most significant attempt was made in 1984. It was initiated by a committee headed by LK Jha, former Governor of the Reserve Bank of India.
Meaningful recommendations were provided in the years preceded by deficient rainfalls. Deficit rains in 2014-15 induced the requirement to change the financial year.
“Any financial year, no matter when it begins or ends, will be affected by the behaviour of the south-west monsoon in the preceding financial year, as well as the one which falls within the financial year itself,” the Jha Committee stated in the Niti Aayog discussion note.
The committee concluded that the budget should be finalised in October, after the south-west monsoon is over–when the kharif crop is known and the rabi crop could be estimated.
The major highlight of the committee’s discussion was that budget, if finalized in October should render positive outcomes to the agricultural nuances. At this time, the Kharif crop is observed and the rabi crop could be anticipated.
This would make possible the budget presentation in November, which would thereby engender the commencement of the financial year in January.
Major impetus is being given to accord the national accounts in consonance with the international practice. On account of this, major confusion which is caused owing to different financial year standards will also be mitigated.